Unseasonal rain, crop losses may keep India’s food inflation high

Indian rice farmer Ibrahim Shaikh says he looked up at the sky daily and prayed for unseasonal rains to stop. His prayers unanswered, he says he started harvesting the wet crop earlier this week.

“The crop was ready for harvesting 10 days back and twenty to thirty percent of the grains have been lost because of heavy rains. If I don’t harvest now, I won’t get anything,” Shaikh said, as he dried harvested paddy on a plastic sheet in Kadadhe village, 110 km (70 miles) east of Mumbai, reports Reuters.

The crop losses for Shaikh and farmers across the country mean that food prices, already at their highest in over two years, could stay elevated, instead of tapering after the harvest as they usually do. India’s millions of rural poor will be particularly affected, hit by both the bad crop and the high prices.

Along with grains, the prices of vegetables, milk, pulses and edible oils, which account for over a quarter of the overall consumer price index, are rising and likely to remain high in coming months.

Economists say annual headline inflation will likely start easing from September’s 7.41per cent peak because of a jump in the index in corresponding months last year, but price pressures on grains, vegetable and milk will persist.

Earlier this week, the Reserve Bank of India said headline inflation will ease from September levels albeit stubbornly and the fight against inflation will be “dogged and prolonged.”

Besides keeping inflation high, higher food prices will be more of a burden in the countryside, where wages have not kept pace with inflation. Meanwhile, rising incomes and a boom in consumption in the towns and cities are driving overall growth to a forecast 7per cent in the current April-March fiscal year, the highest among major world economies.

A Reuters Oct 13-19 poll of economists said growth likely slowed in the July-September quarter, although it should come in at 6.9per cent for the full fiscal year.

According to a research report by Crisil, September inflation was at 8.1per cent for rural poor, defined as the bottom 20per cent of the population in terms of consumption. In urban areas, inflation for the wealthiest 20 percent segment was only 7.2per cent.

“Higher food inflation does tend to act as a regressive tax on the poor,” said Yuvika Singhal, economist at QuantEco Research. “In a post pandemic world, it can stand to perpetuate the K-shaped economic recovery and widen income inequalities further.”

Popat Pawar, who works on a farm in the Pune district of Maharashtra state, says he is getting work, but his employer is not ready to increase wages.

“Prices of everything from edible oils, vegetables to milk have gone up. It is not possible to run household expenses with the same amount of income,” said 43-years-old Pawar, whose says his savings were exhausted last year when he was hospitalised with Covid-19.

Rice farmer Baban Pingle, in Kotharni village in Pune district, says he can’t raise wages as his production costs have gone up with higher diesel and fertiliser prices. Besides, he also needs to spend more on buying essentials.